Kabale Housing Estates Tenants Association v Kabale Municipal Local Council [2013] UGSC 19 (18 December 2013)

October, 2013. The affidavit of Mpirirwe Simpson, the secretary of the applicant company was sworn on 11^th November, 2013 is in opposition of the application. The grounds of this application are that;

1. The Applicant has lodged a notice of appeal in this Honourable court and filed an application for stay of execution of the Court of Appeal orders in Civil Reference No.94 of 2013 which is still pending and the decision will be rendered nugatory if the application succeeds after execution.

2. The appeal has high chances of success.

3. The members of the Applicant Company will individually and collectively suffer irreparable damage if the houses are sold before the application for a temporary injunction is decided.

4. It is just and equitable that the application for an interim order be granted.

Kabale Housing Estate Tenants Ltd, the applicant, is a company limited by guarantee and was registered on 28^th April 2003.The company was formed by the

residents of government houses known as Kabale Housing Estate who according to the Government Divesture Policy were to benefit when the respondent sells the houses. The Association's main objective is pursuing individual and collective rights. Kabale Municipal Local Government Council, the respondent, without following the Government Divesture Policy decided to sell the houses on open market without giving priority to the members of the applicant company as set out in the sale guidelines circular. The applicant through its lawyers MIS Rwaganika & Co. Advocates filed a suit in the High Court at Mbarara and applied for prerogative

5 orders of mandamus and prohibition which were successfully granted. Later the trial judge reviewed the said orders. The applicant aggrieved with the review decision appealed to the Court of Appeal.

According to paragraph 14, 15 and 16 of the affidavit in support of the application by Byarugaba John, a letter was written by a person purporting to be a chairman of

10 the applicant on 10/09/2007 withdrawing instructions from Mr. Rwaganika.

The letter is attached to his affidavit as Annexture "K"l. On the same date other members of the applicant wrote to the same advocate dissociating themselves with the letter withdrawing instructions and the letter is Annexture "K" 2 to Byarugaba's affidavit.

15 Annexture LT' attached to the same affidavit is a letter written by Byamukama withdrawing instructions from Mr. Rwaganika. According to paragraph 17 of Annexture "M" to the affidavit is a letter dated 27/07/2009 appreciating Mr. Rwaganika's work and requesting him to continue.

Augustine Bujara deponed in paragraph 3 of his affidavit that the application has

20 been overtaken by events. In paragraph 4 he avers that Civil Appeal No. 24 of 2008 was terminated /withdrawn on 27/07/2013 unconditionally and parties agreed to abide by the memorandum of understanding that was executed on 24^th July.

The following documents are attached as Annexture "A" to his affidavit. The

25 consent judgment, memorandum of understanding, minutes of the applicant's meeting and the company resolution dated 17^th May 2013.

On 9^th September 2013, when the parties appeared before the Court of Appeal the court noted the consent judgment and accordingly dismissed Civil Application No.6 of 2008 and Civil Reference No.94 of 2073 between the same parties on the

30 ground that they had abated upon entry of the consent termination/ withdraw.

5 Augustine Bujara averred in paragraph 6 of his affidavit that he had been informed by the Company officials that the applicant had not instructed Mis Rwaganika and Co Advocates to take any further legal action after entry of the consent judgment in Civil Appeal No.24 of 2008. That the respondent had already given lease offers to the members of the applicant.

10 When this application came for hearing on 12^th November 2013, Mr. Henry Rwaganika appeared for the Applicant and Mr. Arthur Mwebesa appeared as counsel for the Applicant as well. Mr. Philip Mwaka, Principal State Attorney, together with Mr. Jonathan Bwogi of MiS Bwogi & Co. Advocates appeared for the Respondent.

15 Mr. Mwebesa raised a preliminary point of law on who is the duly instructed counsel for the Applicant. He stated that Mr. Rwaganika is not instructed to represent the Applicant. He further stated that instructions to represent the Applicant were withdrawn from Mr. Rwaganika from 10^th September 2007.He relied on a letter from the Chairman of Kabale Housing Estates Tenant Association

20 Ltd marked annexture "C" to the affidavit of Simpson Mpirirwe .This letter was received by counsel Rwaganika. Mr. Mwebesa also relied on the minutes of the company meeting held on 17^th May 2013 further confirming that instructions were withdrawn from Mr. Rwaganika. The minutes of the meeting and the resolution were attached to the affidavit in reply by Augustine Bujara. He contended that by

25 special resolution; dated 23^rd October 2013 Mr. Mwebesa was instructed to represent the Applicant Company.

Mr. Mwaka, Principal State Attorney as officer of court also raised the issue of legal representation relying on the authority of City African Textile Shop (U) Ltd v Jan Mohamed Ltd HMA No.0437 of 2002 (Unreported). He submitted that counsel

30 cannot represent a company without its resolution authorizing himlher to do so.

5 The learned Principal State Attorney submitted that, therefore, all the actions of Mr.

Rwaganika and Rwaganika & Co. Advocates are a nullity since they were conducted without instructions in form of a resolution. He stated further that what counsel did was against the resolution of the company. He prayed that the instant application before court has no standing and is, therefore, incompetent and should

10 be dismissed. He prayed that Mr. Rwaganika should pay the costs of this Application personally.

In reply, Mr. Rwaganika stated that he had instructions by company resolution although he had not brought it in court. He filed the civil suit on behalf of the company in the High Court at Mbarara. He stated further that the instructions were

15 never withdrawn from him. He referred to the affidavit in support of the Application deponed by Byarugaba John in particular annexture "Kl".The letter in paragraph 1 stated;

He argued that this was not supported by a resolution of the company appointing

20 him as counsel.

Mr. Rwaganika contended that the application before this court was competent because he had full instructions to represent the company from 2003 up to date. He argued that he had never received any notice of change of advocates from Mwebesa & Co. Advocates that their firm was representing the applicant. He

25 prayed that the application should be heard on its merits and he should not be made to pay costs personally because he had full instructions.

I have considered the submissions of both counsel. The main issue for determination is whether Mr. Rwaganika was duly instructed to represent the Applicant.

5 The Learned Principal State Attorney cited the case of City African Textile Shop (U) Ltd v Jan Mohamed Ltd (supra).The case deals with the issue of representation and the basis on which counsel represents a client. The case laid down the principle that counsel represents a company as a client on the basis of a company resolution and if counsel proceeds without a resolution of a company, all his actions are a

10 nullity. Mr.Mwaka correctly submitted that all the actions of Mr. Rwaganika and Rwaganika & Co. Advocates are a nullity since they were conducted without instructions in the form of a company resolution.

Mr. Rwaganika might have had instructions the first time he represented the Applicant Company in the High Court at Mbarara. These instructions were later

15 withdrawn as seen from the special resolution filed by the Applicant Company with the Registrar of Companies on 17^th May 2013 which was duly presented in court during the hearing of this Application. From the affidavit in support of Byarugaba John, Mr. Rwaganika received different instructions. Some shareholders of the applicant were requesting him to withdraw from the appeal and others telling him

20 to pursue the appeal. That notwithstanding Mr. Rwaganika was aware of the uncontroverted evidence contained in the affidavits of Augustine Bujara and Mpirirwe Simpson. According to annexture "E" to the affidavit of Mpirirwe the applicant had reported Mr. Rwaganika to the Secretary Law Council for acting without instructions.

25 The consent judgment between the applicant officials, the memorandum of understanding, minutes of the extra ordinary meeting and the company resolution were attached thereto. The legal position must have been very clear to Mr. Rwaganika that instructions had been withdrawn from him.

"Any application to or appearance or act in any court required or authorised by law to be made or done by a party in such court may, except

where otherwise expressly provided by any law for the time being in force, be made or done by the party in person, or by his or her recognised agent, or by an advocate duly appointed to act on his or her behalf; except that any such appearance shall, if the court so directs, be made by the party in person."

10 Additionally, Regulation 2 (1) of the Advocates (Professional Conduct) Regulations S.1 267-2 provides;

"No advocate shall act for any person unless he or she has received instructions from that person or his or her duly authorised agent."

In cases where the instructions have been withdrawn, counsel cannot claim to have

15 instructions to represent the client. Regulation 3(1) of the Advocates (professional Conduct) Regulations 5.1 267-2 provides;

"An advocate may withdraw from the conduct of a case on behalf of a client where the client withdraws instructions from the advocate."

20 A suit brought without instructions is incompetent. See: Buikwe Coffee Ltd (1962)

EA 327.Counsel must thus appear in court with full instructions and authority from his client. Failure to do so, an advocate will be acting on his own and will not be entitled to any costs.

25 In the case of Danish Mercantile Co.LTD V Beaumont & Anor [1951] Ch C.A 680

Jenkins L.J at page 687 stated the position as follows:

"I think that the true position is simply that a solicitor who starts proceedings in the name of a company without verifying whether he has proper authority so to do, or under an erroneous assumption of authority

30 does so at his own peril, and that, so long as the matter rests there, the action is not properly constituted. In that sense, it is a nullity and can be

stayed at any time, provided that the aggrieved party does not unduly delay his application; but it is open at any time to the purported plaintiff to ratify the act of the solicitor who started the action to adopt the proceedings, to approve all that has been done, then in accordance with the ordinary law of principal and agent and in accordance with the ordinary doctrine of ratification, in my view, the defect in the proceedings as originally constituted is cured, and it is no longer open to the defendant to object on the ground that the proceedings thus ratified and adopted were ,in the first instance, brought without authority".

,

I

15 Clearly the company is not willing to ratify the acts of Mr. Rwaganika, thus rendering the application for stay of execution filed by him incompetent.

Mr. Rwaganika was only instructed by a few members of the company to represent them and not the company itself. As counsel he should have known how to proceed to represent the minority shareholders and not the company.

20 Where a wrong has been done to the company and an action is brought to restrain its continuance, or to recover the company's property or damages or compensation due to it, the company is the true plaintiff. See: Gray Vs Lewis [1873]8 Ch App 1035.The appropriate agency to start an action on behalf of the company is the board of directors, to whom the power is delegated as to manage the affairs of the

25 company. See: United Assurance Co. Ltd v A.G [1995] KALR 308.

However, in instances where a shareholder is aggrieved with what the directors or majority shareholders did, the share holder could bring a derivative suit on behalf

of the minority. I

Mr. Byarugaba John as a member of the company should have brought a derivative suit against the company and not instructed counsel Rwaganika to make the

5 application because his instructions as counsel for the applicant had ceased when the applicant passed the special resolution appointing Mr. Mwebesa as its counsel.

Having considered the above authorities and submissions of counsel, I uphold the preliminary objection that counsel Rwaganika did not have instructions and the

10 only duly instructed counsel is Mr. Mwebesa. The application having been filed by counsel without instructions, it is, therefore, incompetent in law.

In the result I uphold the preliminary objection and the application for interim stay of execution is here by dismissed.

I am of the considered view that there has been a continuous misunderstanding between the individual shareholders which could have been solved through negotiation and mediation. It has been shown from affidavit evidence that different members of the applicant gave Mr. Rwaganika contrary instructions. Such

20 misunderstanding might have unfortunately confused Mr. Rwaganika on the issue of the legal representation. Each party should, therefore, bear its own costs.

Dated at Kampala this 18^th day of ... December 2013

c::--

C.N.B KITUMBA

JUSTICE OF THE SUPREME COURT